A Quarter Century Without a Raise

Wouldn’t it be just lovely to go nearly a quarter century without a raise?

Astonishingly, that’s what restaurant servers–whose wage floor is set by the federal government–face.

Despite opposition from Republicans and business groups, President Barack Obama is picking up his campaign for an increase of the minimum wage. Largely lost in the debate over Obama’s initiative, the need to raise the subminimum wage for tipped workers, a group that also includes bartenders and busboys, is finally getting some attention.

“Somehow the subminimum wage has fallen through the cracks,” said Dean Baker, co-director of the Center for Economic and Policy Research, noting that the U.S. Congress failed to boost the subminimum wage in the latest instances in which it hiked the minimum wage.

“Now at least the subminimum wage is receiving a little more attention,” he said.

The so-called tipped wage has been stuck at $2.13 an hour since 1991. The federal minimum wage is $7.25 an hour.

A bill proposed by Sen. Tom Harkin (D-IA) and Rep. George Miller (D-Calif.) would raise the minimum wage to $10.10 an hour by 2016. The bill calls for an increase in the subminimum wage to at least $7.10 an hour by 2019.

The subminimum wage for tipped workers was created in 1966. That year, the Federal Fair Labor Standards Act was amended to extend wage protections to restaurant, hotel and other service workers. The change created a “tip credit” that allows employers to use customer tips as a credit toward the regular minimum wage.

Employer Abuse

When the tipped minimum wage was created, it amounted to 50 percent of the minimum wage. Because it was frozen in 1991, the subminimum wage is now worth only 29 percent of the minimum wage.

Theoretically, employers are supposed to make up for any shortfall when tips and the base pay fall below the minimum wage. But in practice, workers cannot count on that because abuses are common. In fact, tipped workers cannot even count on receiving the $2.13 minimum pay.

In an editorial on Feb. 17, the Boston Globe noted that a 2009 study of restaurants in Chicago, Los Angeles and New York found that 25 percent of the workers didn’t even receive the tipped minimum, and 12 percent reported that their employer or supervisor stole their tips. In 2012, a Massachusetts federal appeals court ordered Starbucks to pay baristas $12 million in tips pocketed illegally by managers.

Nowadays, the notion of the subminimum wage seems a bit peculiar, even absurd. In what other business besides restaurants do employers expect their customers to pick up the wages of their employees? When the subminimum wage was created in the 1960, restaurant jobs were perceived by many to be the work of teenagers who weren’t the breadwinners of families.

But Amy Traub, a senior policy analyst at the research institution Demos, points out that today many restaurant employees come from low-income families.

“Many of the tipped workers tend to be women and that makes it easier to overlook their situation,” Traub said.

About 70 percent of restaurant workers are women, according to Katie McGinty, a Democratic candidate for governor in Pennsylvania, who is the daughter of a restaurant hostess. They earn an average of 50 cents less per hour than their male counterparts, according to federal figures.

McGinty believes the subminimum wage should be scrapped.

“Tipped workers, who often work several jobs to support their families, should be paid at least a minimum wage for the hard work they do,” McGinty said, when she called for an end to the subminimum wage last month.

Many states have chosen not to wait federal action and have gone ahead to raise their subminimum wage. And seven states have prohibited a separate tipped minimum wage.

All told, 26 states have higher subminimum wages than what’s mandated by the federal government according to Sylvia A. Allegretto of the Institute for Research on Labor and Employment at the University of California, Berkeley. For instance, the tipped minimum is more than $9 an hour in Oregon and Washington.

The National Restaurant Association is fighting the increase of the subminimum wages.

Scott DeFife, the group’s executive vice president for policy and government affairs, says tipped employees at restaurants “are among the highest-paid employees in the establishment, regularly earning $16 to $22 an hour.” He adds, “Nobody is making $2.13 an hour.”

Besides ignoring the evidence that employers often shortchange workers, the association is exaggerating and misrepresenting what typical restaurant workers earn, according to advocates.

Nearly 40 percent of restaurant workers earn at or below the minimum wage, even when tipped wages are included in their pay, according to a study by the Aspen Institute. The median income for food and beverage serving workers was $8.84 an hour in 2012, according to the U.S. Bureau of Labor Statistics.

Stagnant and Falling Wages

The plight of tipped workers is yet another story about how most workers are being wacked by stagnating and falling wages in the country. Low-wage jobs, including restaurant work, make up the fast-growing sectors in the economy. Since 1991, full-service restaurant employment grew by 72 percent, while employment in the private sector increased by 22 percent, Allegretto points out.

More than 10 million workers are employed in the restaurant industry, according to Restaurant Opportunities Centers United, which is lobbying for a higher tipped minimum wage. Many servers cannot afford to feed their families, according to ROC. Servers rely on food stamps at twice the rate of other workers, and they are three times as likely to live in poverty.

“The National Restaurant Association has been writing itself exemptions from fair wages for decades, subjecting millions of workers to poverty,” said Saru Jayaraman, co-founder and co-director of ROC.

“The corporate restaurant industry can absolutely afford to pay its workers better, but won’t do so voluntarily. Tipped workers are counting on their government to hold the private sector accountable to livable wages.”

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